Despite being miniscule on the global stage, crypto assets are being eyed by governments across the globe. You see, centralized financial institutions, especially central banks, see assets like Bitcoin (BTC) as a threat to their hegemony over finance.
Bitcoin is censorship-resistant, much unlike something like PayPal today; non-sovereign, with miners and their respective nodes being distributed across dozens of nations; supply-capped; and public, available for people across the globe, without knowledge of their identity or socioeconomic background.
As a result, a massive regulatory group, the Financial Action Tak Force (FATF), is looking to crack down. Hard.
Crypto Exchanges to Come Under Pressure
While many crypto exchanges, namely Gemini, Kraken, and Coinbase, make a huge deal about know-your-customer (KYC) and anti-money laundering (AML) procedures, most of the industry isn’t like that.
Leading altcoin exchange, Binance, for instance, allows most of its users save for whales (big investors) to use their platform without formal identification submission. The same can be said about other service providers, which are the backbone of Bitcoin and its brethren.
On June 21st, however, this may change. Reported by Bloomberg on Tuesday, the FATF, an anti-money laundering and anti-terrorist financing organization that consists of representatives of dozens of countries will be publishing a note about cryptocurrency regulation.
Per Bloomberg, the rules and guidelines mentioned in this upcoming note will “apply to businesses working with tokens and cryptocurrencies, such as exchanges and custodians and crypto hedge funds.” Although the entities’ statements aren’t legally-binding, nations are expected to follow the FATF’s mandate or face backlash from member countries.
Per Eric Turner, the director of research at crypto data provider Messari, the note is likely “one of the biggest threats to crypto today… their recommendation could have a much larger impact than the SEC or any other regulator has had to date.”
Preliminary analysis and statements suggest that the guidelines will be rather harsh. Bloomberg writes that consumers that make transactions valued at over $1,000, whether through Coinbase or Fidelity Investments, will need to submit or be open to submitting information. Such tidbits of information include: who the recipient of the funds is and why the transaction is occurring. Bizarre, right?
To nobody’s surprise, representatives from crypto funds and exchanges have come out to express their distaste. John Roth of Bittrex, an American altcoin-centric exchange, explained that the guidelines will require a “complete and fundamental restructuring of blockchain technology, or it’s going to require a global parallel system to be sort of constructed among the 200 or so exchanges in the world.” So it won’t be cheap, nor is it healthy for the cryptocurrency ecosystem.
Some have even deemed these rules draconian. Kraken’s Mary Beth Buchanan explains that the expected FATF note is a “case of trying to apply 20th-century rules to 21-century technology.” And as Jeff Horowitz, the chief compliance officer of Coinbase, astutely adds:
“But applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement. The FATF really needs to consider the many unintended consequences of applying this specific rule to VASPs.”
But who knows how exchanges will react when it comes down to the wire?
Increased Regulatory Scrutiny
This latest story marks growing regulatory scrutiny for the industry. Just the other week, we saw Vancouver, Canada’s mayor call for a ban on Bitcoin automated tellers, citing concerns of money laundering and other financial crimes. The odd thing is, easier targets, like casinos and real estate, purportedly result in much money laundering than digital assets.
In a similar string of news the central bank of the Philipines has revealed that it is keeping a close eye on cryptocurrencies. No crackdown was mentioned, but there are evidently more governmental eyes on this space than ever before.
Even if this isn’t a concerted attempt to stem the growth of the industry, it sure seems like it.